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OECD Reviews of Regulatory Reform: Turkey 2002

Crucial Support for Economic Recovery

Among the OECD countries, Turkey figures as a comparative latecomer to regulatory reform. Yet, there is a crucial need for it. Over the last three decades, the Turkish economy has suffered from macro-economic instability and chronic inflation, with implications for both investment and growth. Governance and regulatory structures remained weak and contributed also to the 2001 economic crisis.

Nonetheless, this review notes the highly encouraging efforts currently being undertaken to reform key economic sectors, the public administration and the regulatory framework. These developments appear to mark a fundamental break with the past. Important elements, such as a clear competition policy, are already in place. Fighting corruption, among other measures, is high on the policy agenda, and constitutional amendments are reshaping the relationship between citizens and the state. The "depoliticisation" of the public sector and its renewal on a merit basis is underway. Future success will depend crucially on the continuing implementation of the programme. In particular, sustained political commitment is required well beyond the recovery from the recent crisis.

Market Openness

For the past two decades, Turkey has moved toward increased reliance on market forces and exposure to international competition. In the early 1980s the government replaced its import substitution strategy with a market-oriented economic policy, while trade liberalisation was given new impetus in the mid 1990s with the signature of the customs union with the European Union (EU), which has strengthened Turkey’s economic ties with Europe. Governments have, however, failed to achieve macroeconomic stabilisation. For two decades, fiscal imbalances have fuelled high inflation and undermined growth. At the end of 1999, the government launched a reform programme, supported by the World Bank and the International Monetary Fund (IMF), to stabilise the economy. The programme collapsed with the financial crisis in November 2000 and February 2001, which lead to severe recession....